Privatization of NJ Lotto has enemies

TRENTON — The state is taking a huge gamble outsourcing the sales and marketing responsibilities of the lottery commission to a private company, according to opponents of the legislation.

“If something isn’t broken, don’t try to fix it,” said Democratic State Senator for the 15th District Shirley Turner.

The legislator joins several state elected officials and the Communications Workers of America Union which represents state lottery employees who are outraged at Gov. Chris Christie’s decision to outsource the lottery commission’s sales and marketing division to Northstar NJ until June 30, 2029.

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The CWA filed a protest to stop the execution of the contract, an act which has held up the enforcement of the agreement which should have begun today.

In early April, the joint venture company comprised of GTECH Corporation, Scientific Games International, Inc. and, OSI LTT NJ Holdings Inc., the administrator of the Ontario Municipal Employees Retirement System pension funds, won a bid to provide marketing and sales services to NJ Lottery. Northstar NJ was the sole bidder and winner of the contract.

Turner specified that elected officials have not been allowed to read the contract and the decision to privatize the marketing arm of the lottery commission was not brought in front of legislaturesfor review. The contract, which allegedly was reviewed and signed by select key officials and the governor, is enforceable without senate approval, because only a portion of the commission will be outsourced, leaving the majority of the department still under the regulation of the state government.

According to the company’s press release, a forecasted annual growth rate of 6.07% over the first five years of the contract agreement will generate an average of $1.18 billion in net income for the State, a total gain of more than $1 billion over that period.

Opponents argue that the lottery, the fourth highest revenue generator in the state, has seen a more than four percent revenue lift, annually, between 2000 and 2010. A much bigger return than the Northstar NJ’s promised 1.5 percent rate of growth annually over the next 15 years.

“Northstar NJ is entitled to receive annual incentive payments for annual performance which exceeds certain thresholds as outlined in the Services Agreement, and has given assurances that provide for payments to the State of New Jersey if a minimum, agreed-upon performance level is not achieved,” according to the press release.

Once the contract is executed, the company will make a one-time $120 million payment to the State, that according to the administration, will help plug a budget gap for education programs and institutions.

“This is not a privatization of the lottery, we are only contracting out marketing and sales support services, we’re not selling the lottery,” said Bill Quinn, Spokesman for the State Treasury Department.

“This research has been going on for a couple of years, an outside consultant studied the future prospects of the lottery and there are some trends which indicate sales are slowing ... players are getting older, and in order to compete and have a successful lottery in the future, the company will help it upgrade.”

Northstar will focus to keep the state lottery successful as and a viable income to the state by releasing new games, and possibly new gaming revenue generators via the internet.

Quinn confirmed that according to the terms of the agreement, if Northstar NJ falls short on their projected revenues by more than 10 percent two years in a row, the contract can be terminated, making the sales and marketing functionality state-run once again.

“This is rather shortsighted, I realizing that Governor Christie is having a problem trying to balance the budget and he thinks this is his one shot to try balance that budget,” said Sen. Turner. The Mercer County representative talked about a recent study, conducted by the Christie administrations, which showcased the NJ State Lottery as one of the highest income generators throughout the county and is one of the lowest cost to run in the country.

“He’s killing the goose that laid the golden egg,” she said. “One of the reasons the lottery is run by the state is because there is a high degree of trust, but when you hire a for profit or private company, whose sole purpose , sole purpose is to increase profits for themselves and their shareholders, then things get dicey ... this administration is being penny wise and pound foolish.”

Another negative side effect, according to the CWA and Turner, is the loss of jobs and possibly loss of income to small business owners. “If the marketing is taken over by the company, then over 60 employees, that is almost half of the total number of employees who currently work for the lottery commission, will be laid off,” said Seth Hahn, Legislative and Political Director for CWA NJ.

Although the employees will be offered first choice to work with Northstar NJ if they are not able to secure a position with the company, displaced employees will be given a chance to work in other governmental agencies.

“I heard that story before,” said Turner. “When NJN was privatized employees who were laid off were promised the same thing, but today, almost two years later, some of those people still don’t have a job. This state does not need more unemployment.”

Turner also said small businesses, who rely on lottery sales to bring customers into their establishments, could lose revenue if the private company steers customers from smaller locations into bigger box stores.

“From what I understand, one way Northstar plans on generating income is to shift sales to the bigger named stores, so when you go shopping, you’ll end up buying your ticket and whatever else you need from the big store and not shop at the mom-pop store.”

Retailers and employees who stand to lose the most from the transition blame politics and an upcoming gubernatorial election year as the reason Christie wishes to close the deal with Northstar as soon as possible.

“The company that is going to be awarded the contract has spent the last two years doubling their lobbying expenses and the firms they hired to lobby were headed up by the governor’s campaign manager and campaign lawyer,” said Hahn.

According to the union representative, Governor Christie refuses to issue the contract through judicial review for fear is may not pass muster and Hahn believes the company will do whatever it takes, including marketing to gambling addicts and in lower income urban cities, just to meet their projected numbers.

“This is a back room deal which has to do a lot more about politics instead of the long term fiscal health of the state or the lottery,” said Hahn. “Christie is going to do this no matter what the facts say.”